Halifax cuts mortgage rates in new hope for home buyers

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Homeowners bracing for their two-year fixed mortgage deals to end could be spared thousands of pounds in higher interest repayments after major lenders kicked off the new year by slashing rates.

Rapid rises in the Bank of England’s base rate over the past two years from historically low rates to their current 15-year high of 5.25 per cent have fuelled anxiety for tens of thousands of homeowners whose time to renegotiate expiring fixed-rate deals is approaching this year.

But with competition among lenders growing fiercer in a slow market eyeing multiple cuts to the Bank of England’s base rate this year, Britain’s biggest lender Halifax kickstarted 2024 by cutting its fixed mortgage rates by nearly 1 per cent on Tuesday.

Slashing its rates across its two-year, five-year and 10-year fixed deals by up to 0.83 per cent, Halifax also cut rates by up to 0.92 per cent for its existing customers.

Halifax’s cheapest two-year deal for customers with at least 40 per cent equity in their home is now 4.68 per cent, with a £999 fee – compared with an average of 5.93 per cent for two-year fixed deals across the wider market, according to Moneyfacts.

The building society’s 0.83 per cent cut on two-year fixed deals – from 5.64 to 4.81 per cent – would see monthly repayments on a 25-year mortgage for a £250,000 property fall by £122 a month from £1,556 to £1,434, saving homeowners £1,464 a year.

Leeds Building Society also cut rates on its mortgage deals by up to 0.49 per cent, with its cheapest two-year fixed now sitting at a rate of 4.6 per cent.

It comes after inflation fell back to 3.9 per cent in November, increasing pressure on the Bank of England to start cutting interest rates as both the economy and housing market slowed.

This larger-than-expected slowing of price rises – well below prime minister Rishi Sunak’s target to halve inflation from 10 to 5 per cent by the end of 2023 – and Threadneedle Street’s decision to keep its base rate at 5.25 for a third consecutive month had both served to fuel anticipation of further falls in the mortgage market.

“We’re expecting lenders to come out of the blocks in January fighting because they’ll be desperate to grab market share to make up for the lacklustre year they’ve had in 2023,” Riz Malik, of R3 Mortgages, told The Independent at the time.

New estimates from Yorkshire Building Society suggest this week that the number of first-time buyers with a mortgage fell from a 20-year high of more than 400,000 in 2021 to a 10-year-low of just 290,000 just two years later – shrinking by a fifth.

“Come January there will be more of a smash and grab for business, and these guys will be a lot more competitive,” Mr Malik said, adding: “It might take the first quarter for people to start getting going, but we’re already seeing the green shoots – more enquiries from first time buyers, especially where rents have gone up quite dramatically over the year.”

But leading economists also warned last month that mortgage owners coming off fixed rate deals agreed two years ago would still face “a very different world”, while Britain’s slowing economy and higher mortgage costs mean living standards will “remain pretty desperate”.